Novartis shares fall as generics dent blockbuster heart drug

By Ludwig Burger and Bhanvi Satija

FRANKFURT (Reuters) -Novartis' blockbuster heart treatment Entresto saw sales growth stall in the third quarter of the year, dragging the Swiss company's shares lower, as its top-selling drug comes under pressure from cheaper generics in the key U.S. market.

The drugmaker, on a deal spree to boost its pipeline, posted quarterly earnings roughly in line with forecasts, but analysts pointed to weaker gross margins. New drug growth also failed to allay fears about a plateau in sales of older revenue drivers.

The firm described the quarter as "solid", but flagged "increasing generic erosion" in the United States.

NOVARTIS SHARES FALL; FIRM CONFIRMS 2025 OUTLOOK

Novartis shares fell over 3% in early Tuesday trade.

Sales of Entresto, which lost patent protection this year, were largely flat at $1.88 billion in the quarter, against 20%-plus growth earlier this year.

The results underscore the importance of Novartis' $30-billion push for deals this year to bolster its drug pipeline as established treatments go off patent.

The company, which has raised its outlook twice this year, confirmed its 2025 guidance, with net sales expected to grow by a "high single-digit" percentage and adjusted operating income by a "low-teens" percentage.

Operating income, adjusted for special items, rose 6% to $5.46 billion in the quarter, roughly in line with a consensus estimate cited by analysts of $5.4 billion.

CEO SEES NO GUIDANCE IMPACT FROM US TRADE TARIFFS

CEO Vas Narasimhan told an earnings call that the company did not expect a hit from U.S. trade tariffs. President Donald Trump has threatened levies on drugmakers if they don't invest in the United States, and also pushed for lower drug prices.

"We expect five different groundbreakings before the end of the year at manufacturing sites in the U.S. So no impact from tariffs on our guidance for the remainder of this year and next year," said Narasimhan.

He said talks over drug pricing with the U.S. administration were progressing well. Peers including Pfizer and AstraZeneca have already struck drug-pricing deals.

REVENUE FROM TOP SELLER SEEN DECLINING

Launched a decade ago, Entresto was Novartis' top-selling medicine in 2024, with sales of $7.82 billion worldwide. In July, a U.S. federal judge rejected Novartis' request to stop MSN Pharmaceuticals from selling a generic version.

Analysts project revenue from the drug will surpass $8 billion this year, but will drop to about $6 billion in 2026, according to LSEG data.

Barclays analysts said the third quarter was a "slightly soft print", though not unexpected.

Sales of Novartis' Cosentyx, which faces competition in the treatment of certain types of psoriasis and arthritis from UCB's Bimzelx, were mostly flat year-on-year at about $1.7 billion.

Sales of breast cancer drug Kisqali, launched last year, came in at $1.33 billion.

(Reporting by Ludwig Burger in Frankfurt and Bhanvi Satija in London. Editing by David Holmes and Mark Potter)